India's Diamond Industry Is Facing a Threat of Being Eclipse by China

If a recent report by Associated Chambers of Commerce and Industry of India (ASSOCHAM) is anything to go by, India’s diamond industry is facing a threat of being eclipse by its close rival China in near future.

Associated Chambers of Commerce and Industry of India (ASSOCHAM) The report titled ‘Indian Gems & Jewellery sector-2012’, says that China has every chance of capturing Surat’s market share in the diamond processing business. There is a major threat against India’s Surat-based diamond processing units relocating to China, which is constantly trying to strike direct deals with African as well as Russian mining companies and thereby interrupting the supply of rough diamonds to India. According to recent media reports, Russian Diamond Mining Company Alrosa has entered into two year agreement with Chinese giant Chow Tai Fook Jewellery Group Limited. Alrosa having embarked on diversification drive is all set to give blows to Indian diamond industry which now processes half of Russia’s mined diamonds. The diamond-mining giant has slew of three-year contracts with 24 long term clients which (the contracts) are due to expire in early 2013 including those with Indian diamond companies like Rosy Blue, Diamond India Ltd and Ratilal Becharalal and Sons.

The report which was released by Assocham’s Gujarat Council Chairperson Bhagyesh Soneji and co-Chairperson Jay Ruparel has urged the Government to consider the issue on priority basis and ensure a secured, reliable and uninterrupted long-term supply of rough diamonds for domestic industry through directly engaging with mining countries via various diplomatic channels of trade agreements and others.

Surat’s (Gujarat, India) diamond sector provides employments to about six lakh artisans and an additional two lakh people are employed in cut-polish diamond units of Gujarat. Surat’s contribution is about 90% of diamond processing activities carried out throughout Gujarat. The State accounts for about 80% of total diamond manufactured across India and the country accounts for about 95% share of the world’s diamond processing business.

However, India’s Gem & Jewellery Export Promotion Council (GJEPC) along with some leading diamond company owners have raised the China issue several times in recent past and suggested to take initiatives to the Indian government. Former vice-chairman of the GJEPC Mr. Sanjay Kothari said, "One of the solutions is to introduce presumptive tax which can help bring in more than $2 billion worth of foreign direct investment into Indian diamond sector."

China’s name was hardly heard in the rough diamond processing industry before five years. But today, the diamond cutting and polishing industry in China has grown from $600 million in 2007 to $2 billion in 2011. Also, the strength of skilled diamond artisans has increased from 7,000 in 2007 to more than 60,000 in 2011. The reason cited for this enormous growth is cheaper labor and the supportive government policies.

Now the question is, can China really overtake India’s diamond industry? The answer depends on the Indian government’s future approach. We had frequently discussed about the charter of demands put forward by the trade bodies like GJEPC, GJF etc. where the Indian government needs to take some drastic measures to support the rapid growth of the diamond industry. Now the time has come for it (the government) to wake up and initiate some proactive action to maintain India’s leadership in the world diamond sector.